Drewry says transpacific carriers in 'self-destruct mode'

Tuesday, April 16, 2013

Drewry, the London-based shipping consultant, said transpacific carriers are “still in self-destruct mode,” writing in the latest issue of its Container Insight Weekly publication, that “efforts to increase eastbound freight rates by ocean carriers operating between Asia and West Coast North America (WCNA) remain ineffectual with new services planned rather than laying up unwanted vessel capacity.”
Between March and October, Drewry said carriers managed to keep overall eastbound vessel capacity deployed between Asia and North America's west coast “virtually unchanged” by using sailing cancellations to regulate average vessel utilization. It said 16 voyages were omitted in March, on top of the 37 omitted in February and 16 in January.
Carriers kept capacity steady even as CMA CGM and Mediterranean Shipping Co. and the CKYH alliance have upsized their vessel sizes.
CMA CGM and MSC have already increased the size of three ships in their Bohai Rim/New Orient Express to 11,000 TEUs, and another three 8,200-TEU ships will be upsized to 11,000 TEUs, Drewry said. It also said CKYH’s PSX service is two-thirds of the way through the process of bumping up the size of its ships in that string to 10,000 TEUs. It said CKYH intends to “replace the remaining two vessels averaging 8,000 TEUs with a further two 10,000-TEU ships.”
However Drewry said “overall estimated eastbound cargo shipped in 1Q13 fell by 8.8 percent compared to the previous quarter.
“Against this background, ocean carriers’ recent new service announcements therefore beggar belief, so most probably only indicate that the transpacific tradelane is felt to be the better place to bury unwanted vessel capacity than in the Asia-Europe route on the grounds that its prospects for growth are ‘not as bad,'” the firm added.
Drewry specifically noted:

Evergreen intends to bring back its CPS 2 service in May and it will eventually deploy five 4,200-TEUs ships in a weekly rotation.

China Shipping (CSCL) and United Arab Shipping Corp. (UASC) also intend to introduce a new service in May, deploying a fleet of six 4,250-TEU vessels between Nansha, Yantian, Xiamen, Los Angeles and Nansha.

UASC will help CSCL to upgrade its existing ANW1 schedule from six vessels averaging 2,832 TEUs to bigger 4,250-TEU units. The package also includes UASC taking slots on CSCL’s AAC service.

It estimates both the new Evergreen and CSCL/UASC services in May will add about 3 percent capacity on what was available in early March and “vessel upgrades will add more vinegar to the wound unless cargo growth takes off unexpectedly.”
Drewry said cargo from the WCNA to Asia in the first quarter was 1.46 million TEUs, 8 percent more than in the previous quarter, but no more than in the third quarter of 2012.
"In other words, there are few signs yet that President Obama’s drive to increase U.S. exports is succeeding in the case of containerizable cargo to Asia," it said, adding "Japan’s recent 20 percent currency devaluation will certainly not be helpful in this respect." - Chris Dupin